Liberty Matters

Defense of Western Legal Tradition: Consent or Wealth?

In his post “Fetishizing Consent,” Leeson perceives both a consent-centered defense of Western legal tradition and a wealth-centered one. According to the first, Western legal tradition is laudable because it is (mostly) based on consent. According to the second, it is laudable because it facilitates voluntary exchange, which maximizes wealth.
In his reply, Lottieri amends the consent-centered defense by “dehomogenizing” the Western (politico-)legal tradition and distinguishes a centralist line (the emergence of large sovereign nation states) and a decentralist line (cities, small states, federal states).
Lottieri’s distinction is relevant. From a libertarian perspective, there is no need for a bulky defense of Western legal tradition. It is a geographical-historical notion, and nothing allows us to presume that this tradition would be homogeneously liberty-oriented. The problem, however, is whether the centralist line can be fully qualified as “anti-liberty” and the decentralizing one fully as “pro-liberty.” Lottieri seems to suggest this qualification.
To challenge this qualification, let us consider two historical examples.
Nobody will doubt that the rise of cities in the Middle Ages enlarged the scope of liberty for many people. Serfs could escape feudal exploitation; trade opportunities were dramatically enlarged; and city authorities based their policy decisions on (more or less) democratic procedures.[53] Nevertheless, cities often acted as monopolistic firms, violently suppressing competition from outside. The guilds of Ghent, for instance, often raided the countryside around Ghent in order to destroy all weaving chairs they could discover. This practice was ended by the “centralizing” Burgundian dukes. They broke the city monopolies, stimulating market competition and allowing for a wealth-enhancing boom in the second half of the 15th and first half of the 16th century.[54]
Until the French Revolution, France was legally segmented into pays de coutumes (places where legal customs applied). Legal rules concerning property, contract, tort, inheritance, and family law differed from pays to pays. This hampered the evolution towards enlarged interregional markets. The decentralized Parlements were eager to conserve this segmentation and opposed any legal reform. This deadlock was finally broken after the French Revolution. Under the pressure of Napoleon’s central authority, the famous Code Civil of 1804 was enacted unifying French private law and allowing the emergence of a wide national market.[55]
According to Lottieri’s consent-centered and decentralist view, the interventions of the Burgundian dukes and Napoleon should qualify as anti-liberty because they were not based on citizens’ consent. According to the wealth-centered view as developed by Leeson, both interventions were pro-liberty as they enlarged dramatically the scope of interpersonal exchange.
Both examples seem to suggest a difficult dilemma for libertarian theory. Either we support decentralizing political institutions at the risk that some of them will tilt towards small tyrannies, or we support the evolution towards larger political areas (the nation-states, the USA, the European Union) in which a general legal order prevails at risk the that these large units will develop into big government.
To avoid this dilemma, it is useful to make the following distinction about political-legal institutions. Some of these institutions deal with the provision of public goods and club goods (roads, water provision, sewers, defense, police, public spaces, etc.).[56] Some of them deal with the rules that individuals and their associations (legal entities, corporations, cooperatives, etc.) have to respect in their relationships. The distinction between private-law and public-law institutions, made in continental legal theory since the beginning of the 19th century, corresponds more or less with this distinction.
As far as the first type is concerned, Lottieri’s decentralizing viewpoint should be fully supported. The provision of public goods and club goods requires firms in the Coasean sense and involves a relationship between management and customers.[57] To maximize customer control over management, it is necessary to keep these firms as small as possible. Moreover, keeping these firms, which often exert territorial monopolies, small facilitates “voting with the feet.” This voting in fact constitutes a second-best to classical interpersonal or inter-company competition. For this reason, libertarians should not support the tendency in Europe to transform the European Union into a European “federal state.” Such a state would irresistibly evolve towards an uncontrollable Leviathan.
As far as the second type of institutions is concerned, the wealth-centered viewpoint should be supported. In exchange relationships, wealth is enhanced when the exchange possibilities are as wide as possible. This means that the legal institutions ordering exchange relationships (property, contract, and tort) should be applicable in wide jurisdictions. The procedure through which such institutions emerged and such wide jurisdictions were constituted are in this respect of lesser importance.[58] In England such a wide jurisdiction came about through the judge-made common law; in France, through the intervention of a quasi-dictator such as Napoleon. In both cases, institutions were established facilitating exchange relationships in a very wide area and by this, enlarging freedom and wealth. To mention the case of Europe again, libertarians should for this reason also not support nationalistic tendencies in Europe aimed at reestablishing protectionist political entities. The European nation-states should protect European citizens against monopolization of public-goods provision by a European government. The European Union should protect European citizens against protectionist intervention by their national governments and safeguard the internal market as a wide area of exchange.
A combination of wide areas of exchange, ordered by widely applicable private-law institutions, with a large number of small-scale political firms providing public and club goods seems to be the institutional success formula for maximizing wealth and liberty.
[53.] About the liberty-enhancing features of medieval cities see Boudewijn Bouckaert, “Between the Market and the State: The World of Medieval Cities” in Gerard Radnitzky, ed., Values and the Social Order, volume 3 (Avebury: Aldershot, 1997).
[54.] See Douglas C. North and Robert Paul Thomas, The Rise of the Western World: A New Economic History (Cambridge: Cambridge University Press, 1976), p. 84.
[55.] According to Arrunada and Andonova this legislative intervention in France was necessary to impose free-market principles on the judiciary. Most of the judges were still appointed under the Ancien Regime and were still imbued with backward feudal legal opinions. See Benito Arrunada and Veneta Andanova, “Market Institutions and Judicial Rulemaking” in C. Ménard and M.M. Shirley, eds., Handbook of New Institutional Economics ( Berlin: Springer, 2005).
[56.] Many goods labeled public goods by neo-classical economists are in fact rather club goods. This is well-analyzed and documented in Fred Foldvary, Public Goods and Private Communities (Washington, D.C.: The Locke Institute, 1994). Whether all public and club goods can be provided by voluntary associations is a far-reaching discussion for which there is no space here.
[57.] In his last comment, Leeson refers to Leoni’s rejection of anarchism and the fact that for some fields, coercive majority rule remains necessary (Bruno Leoni, Freedom and the Law,, p. 191). Very probably Leoni had the provision of public and club goods in mind, for he referred to “cases [in which] the issues involved concern everybody and cannot be dealt with by the spontaneous adjustments and mutually compatible choices by individuals.”
[58.] Alesina and Spolaore establish a relationship between the efficient size of nations and the widening of market areas through globalization. When wide market areas can be established through free-trade agreements, such as the European Union, WTO, NAFTA, and Mercosur, the nation state is not needed anymore for establishing wider market areas, as was the case in the 19th century. As a result, states will focus more on public-goods provision, which is more efficient on a smaller scale. (Alberto Alesina and Roberto Spolaore, The Size of Nations [Cambridge, MA: The MIT Press, 2005].)